# kaal:claim:3606663-007

**Claim.** Once the staggered private sale discounts of up to fifty percent are counted as a cost of capital, the cost structure of an ICO is arguably significantly higher than that of an IPO, notwithstanding the ICO's lower legal and offering expenses.

**Type.** failure  **Support.** argued

**Holds when.**

- ICOs conducted in 2017 and 2018 with staggered discount structures
- comparison against average IPO underwriting fees of four to seven percent

**Source quote.**

> Considering these steep discounts to incentivize earliest possible investments, the cost structure of ICOs is arguably significantly higher than the cost structure of an IPO.

**From.** Kaal, *Digital Asset Market Evolution* (2020), 2. Initial Coin Offerings, page 16

**Cite as.** Kaal, Digital Asset Market Evolution (2020). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3606663

**Verify.** sha256 of source PDF `d1d4a15a293b715bb6a5a32e689f59c3a1587915039ba9a1cf4eeb8ee2a1e57c` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202020%20-%20Digital%20Asset%20Market%20Evolution.pdf

**Failure mode.** hidden discount cost exceeds underwriting fees  (family: valuation-and-pricing-failure)

**Topics.** securities-law

**Keywords.** ico, ipo, cost-of-capital, discount-structure, capital-formation

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